Tech's quest to revive San Francisco's underbelly

For tech, a move from the suburbs to the city
For tech, a move from the suburbs to the city

Stroll along Market Street in San Francisco's historic Tenderloin district and you find yourself wandering through a futuristic Internet enclave.

Customer support software developer Zendesk is next to dating site Zoosk, and a stone's throw from co-working space WeWork. A bit further up, Uber and Square are neighbors.

In the offices adjacent to the nearby Warfield Theater, where artists ranging from Louis Armstrong to the Grateful Dead performed, venture capital firms Benchmark and Artis Ventures have opened shop as have Spotify and a productivity start-up called Quip.

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And then there's Twitter's 295,000-square-foot global headquarters in a 1937 art deco building.

Welcome to Mid-Market, home to a new technology gold rush.

Sort of.

For this is no upscale community, but an area that for decades was deprived of anything corporate or at all luxurious. Where there was once an abundance of art, a half-century of decline produced abandoned buildings, homelessness, drugs and prostitution.

Even many locals don't feel safe after dark.

"Tech companies are coming in, putting what I call their cathedrals on Market Street," said Del Seymour, who founded and runs the Tenderloin Walking Tour, a close-up view of the neighborhood's grit and glory. "The faces are really changing down here."

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All this just a few blocks from SoMa (South of Market), where high-priced software developers have spent the past seven years cramming into old warehouses, lifting real estate prices near record levels and inspiring chatter of a new tech bubble.

The facelift for the long-neglected Tenderloin began in 2011. With Twitter considering a move south to Silicon Valley, Ed Lee, San Francisco's tech-friendly mayor, established a plan to keep the microblogging site in town and at the same time revive a lengthy stretch of Market Street that featured boarded-up buildings and a storefront vacancy rate of 30 percent.

Any company with annual payroll expenses of at least $1 million that agreed to open on Market between Sixth and 11th streets (certain buildings were excluded) and some surrounding blocks would not have to pay tax on added payroll for six years. That's real savings for fast-growing tech companies, potentially amounting to $56 million just for Twitter.

`Shared prosperity agenda'

The tax incentive coupled with cheap and available space, certainly compared to other parts of the city, spurred a boom that continues today. Some 11,000 employees, mostly in tech, have come to the area since 2011, according to data provided by the city.

Boutique hotels are on the way, as are theaters, parks and a grocery store. Apartments buildings are coming in bunches, with 5,600 residential units in the pipeline, 20 percent of which will be priced below market rate. The Better Market Street project has proposed a $400 million plan to improve transit and make the area bike and pedestrian friendly.

"The mayor is very focused on a shared prosperity agenda that ensures that this economic success benefits everyone," said Todd Rufo, director of the Office of Economic and Workforce Development. "We remain focused on creating a healthy, vibrant and economically diverse area in this neighborhood that serves all the residents of Central Market and the Tenderloin."

Call it the idealistic future of the Tenderloin, because for now, the homelessness, poverty and drug abuse are still quite apparent, sitting literally at the feet of some of the world's fastest engines of wealth creation.

Del Seymour, left, at a St. Anthony's event
Source: Taylor Skillin

Seymour, an Army veteran and former drug addict who now works with numerous local nonprofits, starts his tour at United Nations Plaza, next to City Hall.

He guides visitors around the block to the St. Anthony Foundation, a 65-year-old institution that serves 3,000 meals a day to the city's poor, and then to St. Boniface Catholic Church, which every Monday through Friday morning turns its pews into daybeds for more than 100 homeless people, even during Mass.

"When people come in, if they're going to sleep, they go to the right and if they're going to go to Mass they go to the left," said Laura Slattery, executive director of the Gubbio Project, the nonprofit that oversees the daytime shelter.

Far from the cushy, sprawling Silicon Valley campuses built by Google, Cisco and Oracle, this hyperurban setting is tech's new backyard. (Tweet This) Software developers are shunning the suburbs to work in a part of San Francisco that is known more for reeking of urine than fostering riches.

If people see us fail, they'll say it couldn't be done.
Peter Fenton, general partner at Benchmark

The challenge for companies leading the charge is to establish workplaces that attract prospects and comfort employees without spurring the whitewashing of a diverse and largely low-income neighborhood.

The test is underway. Can an urban renewal project focused on business development, artistic revival and environmental cleanup create a landscape of peaceful co-existence while also uplifting the downtrodden?

Or will an improved economy boost living costs and force those getting by on fixed incomes and government subsidies to find new dwellings, thus mirroring past revitalization projects in places like New York, Boston and Philadelphia?

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"I don't think there's a great proxy," said Peter Fenton, a general partner at Benchmark and a board member at Twitter, Zendesk and Quip. Benchmark opened its Mid-Market office in 2012. "If people see us fail, they'll say, `You see, it couldn't be done.' If we succeed, I think there's going to be a narrative here that ends up being the role model for a lot of other cities."

However, San Francisco isn't like other cities. Deeply progressive roots that date back to the labor movement over a century ago are responsible for an economic system that preserves urbanism and provides a safety net for the poor. The city's notorious single room occupancy hotels, or SROs, offer affordable, if not desirable, housing for people who are often one bad break away from life on the streets.

Those residences can't legally be removed unless they're replaced with equally affordable units.

An F-Line streetcar makes its way past a number of vacant storefronts on Market Street in San Francisco. For years, San Francisco leaders have tried unsuccessfully to revitalize the city's downtrodden Mid-Market Street area, where tourists are scarce and crimes frequently unfold in broad daylight.
Eric Risberg | AP

In the Tenderloin, 78 percent of the housing stock is rent stabilized or permanently affordable, compared with 55 percent in the rest of San Francisco, according to city data. In other words, there are structural limitations to gentrification.

Even with those safeguards in place, Mayor Lee is demanding companies give back to the community in order to qualify for tax breaks. Six companies—Twitter, Zendesk, Zoosk, Spotify, One Kings Lane and Microsoft's Yammer—have signed community benefit agreements, or CBAs, outlining their planned volunteer, investing and philanthropic activities.

Twitter's projects include housing advocacy, education for kids, working with groups such as the Boys and Girls Club and SF Food Bank and $3 million in grants to nonprofits over the next four years. The company is opening a 4,000-square-foot facility called NeighborNest, a technology lab and teaching facility designed to help nonprofit groups educate their clients and prepare them for the workforce.

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"The magic of that location is going to be bringing together our nonprofit partners, clients of our nonprofit partners and Twitter employees," said Caroline Barlerin, Twitter's head of community outreach and philanthropy. "We'll be teaching employment skills, we'll be teaching basic technology skills, we'll be teaching housing skills, and a lot of other areas where people can understand pathways to use technology as a way to get to the next step in their lives."

Other companies on Market, including Square, Uber and Dolby, are in buildings that don't qualify for the tax break. But they, too, are launching volunteer programs and encouraging civic activity among their workers.

While they're all searching for their own creative and productive ways to contribute, one company's name comes up routinely when neighborhood groups talk about who's doing it right: Zendesk.

Practicing what they preach

Zendesk employees participate in the company’s annual Community Service Day.
Source: Zendesk

Founded in Copenhagen in 2007, Zendesk equally practices and preaches Mid-Market activism. The company provides grants and sends volunteers to senior centers, food banks, homeless facilities and job training programs, Additionally, Zendesk engineers built a mobile site in tandem with St. Anthony's called Link-SF that helps the needy find nearby food, shelter and other services, because 40 percent of the nonprofit's clients are using mobile technology.

Hop aboard Seymour's walking tour on any given day and you're likely to be joined by at least a couple new Zendesk employees.

"In your first week here, in your onboarding as an employee, you not only learn about our social responsibility message. Your first day here you're volunteering out in the neighborhood," said Tiffany Apczynski, Zendesk's director of public affairs. "We're a socially minded company, and that's been a competitive factor for us."

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Another way Zendesk has deviated from the perk-happy trend in tech is by forcing employees to get their own food. Instead of supplying daily gourmet grub, the company encourages workers to scope out the neighborhood and support local businesses.

That used to be a bigger challenge, but in September an artisan food court called The Hall opened directly across Market Street from Zendesk's headquarters. Vendors serve up braised pork shoulder, Vietnamese spring rolls and smoked oyster chowder, and there's a bar in the middle for the happy hour crowd.

"That is, for all intents and purposes, the Zendesk cafeteria," Apczynski said.

The Hall was the brainchild of Craig Young, a real estate developer who moved to San Francisco from the East Coast to take part in the Mid-Market building boom. In early 2013, Young's firm, Tidewater Capital, and a partner group called War Horse bought property at 1028 Market, on the corner of Sixth, home to an abandoned billiard hall with a six-foot high barricade out front.

Lunching at The Hall

Source: Patricia Chang

Young wasn't thinking about food when he made the purchase; he was planning for a 186-unit apartment building. It's one of about three dozen real estate developments—new buildings and renovations—in the area. Others include a four-tower 754-unit luxury rental complex called NEMA that opened to residents in 2013, and a 15-floor tower with 190 below-market rate units scheduled to start taking residents this summer.

Young knew it would be years to get all the permits necessary to break ground on his apartment complex. So rather than being the proud owner of a corner eyesore, he got to work on a temporary food court that now serves about 4,000 meals per week and hosts live music on Tuesday evenings.

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"The idea was to in some way activate the street while we go through a long arduous entitlement process with the city and in doing so create a place and try to stimulate community in the neighborhood," said Young.

Still, The Hall isn't for everyone, certainly not in this neighborhood.

The neighborhood can use a lot of cleaning up, baby
Lillie Hill-Turner
diner at St. Anthony's

While tech workers nibble on $12 sandwiches, Lillie Hill-Turner is two blocks away lunching on beans and salad at St. Anthony's, and she's not paying a dime. Hill-Turner started dining at St. Anthony's 15 years ago when she was homeless and hungry.

For the past decade, she's had a place to live but still counts on the free meals because she can't stand up to cook. Hill-Turner hasn't seen much of a change in the Tenderloin, though she's hopeful.

"The neighborhood can use a lot of cleaning up, baby," she said. "It's pretty rough. I don't come here to hang out. I was forced to before, but I don't have to now."

St. Anthony's is a neighborhood linchpin, a place where anyone can get a meal, no questions asked, and the poor can turn for medical help and housing advocacy. It also has a tech lab for people to learn computer skills, send emails, build a resume and connect with others.

Protecting the needy

A short walk away is Glide, another nonprofit cornerstone. For over 50 years, the Rev. Cecil Williams has led Glide in providing food, hospitality, spiritual services and safety to the community. As much as he appreciates the funding and support that tech companies offer, there's plenty of work to do to bridge the gap between businesses and local residents.

"They could become more sensitive, more caring and more excited about being with people who are less than what they describe themselves," Williams said.

He's confident progress will be made, and he expresses a sentiment that's pervasive in the Tenderloin. Yes, he wants to see a cleaner, more vibrant neighborhood with better services for the destitute. But to truly call this a revival, the tech companies have to be more than just good philanthropists and volunteers. They need to be better employers.

St. Anthony's Tenderloin Technology Lab
Source: Taylor Skillin

The activist community wants the likes of Twitter, Zendesk and Spotify to create jobs that are suitable for those from less fortunate environments who to this point in life have lacked the skills and training required for technical positions. Looking further into the future, they want to see educational programs that are preparing the next generation of residents for work in technology and beyond.

Benchmark's Fenton says the dream scenario is that in 10 years, his firm is investing in "an entrepreneur who started his company in the Tenderloin, who grew up in the Tenderloin."

That's the paradigm shift that Seymour is waiting to see. Tech businesses have to move beyond charity and help come up with ways for community members to be productive contributors to the work environments of the future. He's even helped establish a project called Code Tenderloin, with the mission of connecting residents to businesses and offering work essentials like childcare, transportation and proper attire.

Seymour has patience, and he's urging critics to give the grand plan some time. But to local leaders and families, a major factor in determining the true and unique success of this revitalization experiment will be the number of doors tech companies open to parts of the Tenderloin that have spent the past several decades mired in crime and abuse.

"We've got a lot of bad corners here, and we tend to send the police to clean the corners up," Seymour said, in wrapping up his tour. "Let's not send the police, let's send HR. Send HR and we'll clean up the problem."